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United Airlines CEO pitches merger with American Airlines
United Airlines is pushing for a merger with American Airlines. This could see the big four airlines reduced to the big three. Observers say there would be less flight options, convenience and higher costs.
Washington, D.C. - The CEOs of United and American Airlines are said to have discussed a blockbuster merger during a meeting with Donald Trump. The world’s two largest carriers combined would be an enormous $38 to $45 billion deal.
A blockbuster deal?
Instead of the "big four" – American, United Delta, and Southwest, it would be reduced to the "big three". Neither company has commented on this.
What they're saying:
Severin Borenstein is a renowned energy and airline economist at UC Berkeley Haas Business School. "In any other administration, this would be dead in the water. I think the only reason they're having these discussions is because the Department of Justice under Trump is so unpredictable that you can't rule out that they would actually be able to get this through," said Professor Borenstein.
Paul Hudson, president of the non-profit consumer advocacy group, Flyers Rights, said, "We need more competition, not less. If these two merge, conceivably you would have one airline controlling 40% of all the flights in the United States."
At many airports, United and American compete head-to-head. "Where they overlap, there has been a long history of airline mergers that have ended up raising prices for airlines," said Borenstein.
Will passengers pay the price?
What do passengers think?
"Prices are high enough as they are and of course, makes it a lot tougher for me and for many other people. I don't think it's a good idea. It sounds like a monopoly," said Sandra Kuhl.
"It certainly would be, in my estimation, a chance for the diminishment in service in terms of locations, frequency of flights. I think that competition is healthy in all industries," said Jim Kolb.
As reported last week, higher fuel prices have already caused some airlines to charge more for baggage fees, to raise their prices and to lower the number of seats they offer to keep those prices high. This would have some of the same impact.
"There will be fewer flights, less convenience and more delays," said Hudson.
Less travel options
Hudson said the number of airports serving as hubs would be reduced, forcing people to take multi-leg flights instead of direct flights. "Since 2000, there's been a four-fold increase in delays over three hours," said Hudson.
There would be a major fight to block a merger. "This merger would undoubtedly be challenged by attorneys general at the state level, particularly in Illinois, where they are the two major airlines at Chicago O'Hare Airport," said Borenstein.
The only upside: forcing the majors to give up certain routes could cause smaller competing airlines to grow or new ones to come in the consumers' favor.